So, Variable Rate vs Fixed Rate… what is going on?

The five-year GoC bond yield continues to rise (and this is how fixed rate mortgages are priced – “when the bond yield rises… fixed rates follow”).

Variable rate mortgages are priced with the “Bank of Canada’s” decisions on their rates (so when you hear “the Bank of Canada raised rates at their meeting” – the banks and lenders are quick to follow) add to that the fact that “discounts off of prime” (these are what lenders use to entice you to come and use them for your mortgage) are shrinking – and THAT, combined with the BoC’s warning that “Canadians Should Expect Higher Rates” means that the current gap between today’s fixed vs. variable rates could soon be reduced significantly.

However, let’s look at some quick reasoning behind the “Variable Rates will be Short Term Pain” with the way the governments tackled Covid (by throwing money at the public) and then add in supply chain issues… this has helped drive inflation to new levels not seen in decades.

Unemployment is at record lows, so let’s add labour costs to the “inflation drivers” list… and just for good measure – add in the “War in Ukraine” to help inflate food prices (with both Russia and Ukraine being larger wheat producers) and Russia can be again added to the list by being a larger oil producer… the embargo that are being implemented (further adds to inflation for everything and anything that involves shipping).

So… these (I feel) will be coming out in the wash sooner than later by: the public getting the pent up demand for “shopping and activities” that were reduced through Covid; supply chain issues being resolved by this demand being taken care of and habits getting more “back to normal” and then the eventual resolution in Ukraine (the world hopes for this on a daily basis).

Take this all into account when comparing variable rate vs fixed rate… and I feel Variable Rate Mortgages will still be the winner 5 years from now when it comes time for renewal and we look back at the math.

If you’d like advice on YOUR personal position, I’d be happy to help you compare variable rate vs fixed rate mortgages for your own … give us a call at and let’s come up with a plan that’s right for YOU.  If you’re ready to apply for a mortgage, you can find our online mortgage application here.